The B2B payments world is changing fast due to both the increased adoption of digital payment methods over the past several years and the economic upheaval brought on by the COVID-19 pandemic. Approximately $25 trillion in payments flows between American businesses annually, and B2B payments total $120 trillion globally. One-third of B2B payments are processed electronically, but accounting professionals are still pushing to expand that share. A recent survey found that 81 percent of business leaders expect real-time payments to dramatically change the business world, with 66 percent anticipating that they will eventually stop accepting cash or paper checks altogether.
The push for real-time payments is often stymied by challenges to its implementation, however. Businesses moving their payments online face fraud concerns, which — coupled with the frequently exorbitant costs of upgrading legacy systems — can be enough to convince many to stick with their existing paper-based methods. New technologies like APIs and webhooks can mitigate these concerns, however, by forming secure and compliant payment networks that can process transactions in the blink of an eye.
The following Deep Dive explores the various challenges that prevent businesses from embracing real-time payments, as well as how companies are deploying APIs and webhooks to make instant payments a reality.
The challenges of B2B transactions
Security is a perennial concern when it comes to real-time payments, as hackers located remotely can intercept transactions much more easily than thieves who must physically snatch paper checks or payment cards from businesses or banks. The payment itself is not typically fraudsters’ primary target, however, as many bad actors instead look to harvest the sending or receiving businesses’ private data by exploiting payments as entry points into their systems. A recent survey found that one-third of businesses were concerned about fraud in their B2B payments — especially those conducted across borders. Twenty-six percent also expressed concern about the sanctity of sensitive data. Wire transfers are generally considered to be the payment method most vulnerable to fraud, but they are also the most prevalent type of instant payment, used by 69 percent of businesses surveyed.
Upgrading legacy systems to accommodate real-time payments can also be costly. The actual price can vary wildly depending on companies’ payment volumes, but only larger businesses can typically afford the automation investments necessary to power instant payments. Just 30 percent of SMBs have taken steps to automate their AP processes in anticipation of deploying instant payments, compared to 58 percent of larger businesses. The hesitation associated with the expense also disproportionately affects smaller companies. Only half of the 70 percent of SMBs that have not automated intend to do so, while 69 percent of yet-to-automate large companies have begun this process.
These security and cost obstacles are far from insurmountable, as new technologies are growing more commonplace among forward-thinking companies. APIs and webhooks are some of the most promising of these innovations and have the potential to make payments more secure and efficient.
The benefits of APIs and webhooks
APIs provide a high level of security for instant payments by leveraging rotating keys, unique identifiers that authenticate users and developers accessing an API. Periodically issuing new keys means those that have been stolen by fraudsters will be useful for only a short period of time. Anomaly detection systems can further secure API-based instant payment systems by deploying machine learning protocols that sort through the thousands of daily transactions enabled by a given API, thus establishing a baseline for normal activity. Any unusual commands, transactions or login attempts are then spotted and flagged or blocked.
Webhooks can also promote fast and secure real-time payments. They consist of code snippets that keep key data in sync between two or more remote applications, such as sending and receiving payments processors. Webhooks can immediately detect when payments are sent and approved during a transaction, saving accounting staff precious time in cross-referencing receipts and confirmations to ensure that payments were made and accepted. Thirty-four percent of companies that use APIs currently utilize these tools, and payments are one of their many applications.
Real-time payments are becoming more important than ever to ensuring speedy and seamless transactions amid the current economic uncertainty, and APIs and webhooks could be crucial to making them secure and accessible to many businesses. The COVID-19 pandemic and its financial hardships show no signs of receding, meaning businesses must closely examine instant payments to ensure that their customers, vendors and suppliers stay satisfied.